Depression is a prevalent chronic condition nationally and is associated with high levels of impairment. Extraordinary advances have been achieved in the last two decades in the pharmacological treatment of deppression. The introduduction of these agents has altered the way in which depression is treated in the US and may have a large impact of individuals and their well-being. New treatments are also more expensive than older medications and are associated with remarkable increases in spending. The principal goal of this research is to develop practical, aggregate measures of the economic value of new methods for treating depression. I propose to measure the economic welfare generated by innovation in depression treatment by estimating a demand system that explicitly accounts for some unique features of the delivery of mental health care. From the demand estimates, several types of commonly used measures of welfare gain for the treatment of depression will be constructed. There are several competing approaches to measuring welfare change from innovation, of which the demand side approach is one. Welfare gains using the demand side approach will be compared to alternative measures.